May 4, 2023
Credit and credit aggregates, Lender of last resort, Monetary and financial indicators, Financial institutions, Financial markets, International financial markets, Monetary policy implementation, Financial system regulation and policies, Financial services, Financial stability, Market structure and pricing, Payment clearing and settlement systems
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How Banks Create Gridlock to Save Liquidity in Canada's Large Value Payment System
We show how participants in Canada’s new high-value payment system save liquidity by exploiting the new gridlock resolution arrangement. The findings have important implications for the design of these systems and shed light on financial institutions’ liquidity preference. -
May 4, 2023
Staying the course to price stability
Governor Tiff Macklem explains how monetary policy is working to bring inflation down and outlines the challenges ahead. He also discusses recent stress in the global banking sector and how financial stability and price stability interact. -
A Review of the Bank of Canada’s Support of Key Financial Markets During the COVID-19 Crisis
The COVID-19 pandemic placed unprecedented strain on the global financial system. We describe how the Bank of Canada responded to the rapidly deteriorating liquidity in core Canadian fixed-income markets. -
Pricing Indefinitely Lived Assets: Experimental Evidence
We study the trading of an asset with bankruptcy risk. The traded price of the asset is, on average, 40% of the expected total dividend payments. We investigate which economic models can explain the low traded price. -
From LVTS to Lynx: Quantitative Assessment of Payment System Transition
We quantitatively assess the changes in participants’ payment behaviour from modernizing Canada's high-value payments system to Lynx. Our analysis suggests that Lynx's liquidity-saving mechanism encourages liquidity pooling and early payments submission, resulting in improved efficiency for participants but with slightly increased payment delays. -
Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media
News media present competing interpretations of what breaking news implies for the macroeconomy. Recent examples include news reporting on high inflation and yield curve inversions. Do these narratives shape macroeconomic sentiment? In this paper, we highlight the importance of narratives using evidence linking traditional media and social media. -
The Impact of Unemployment Insurance and Unsecured Credit on Business Cycles
This paper studies how unsecured consumer credit impacts the extent to which unemployment insurance (UI) policies smooth aggregate consumption fluctuations over the business cycle. Using a general equilibrium real business cycle model, I find that unsecured credit amplifies the extent to which UI smooths cyclical consumption fluctuations. -
What we can learn by linking firms’ reported emissions with their financial data
We analyze the financial statements and stock prices of publicly traded firms incorporated in Canada that report greenhouse gas emissions. We find that these firms primarily use equity financing. We also find that equity investors increasingly account for firms’ emissions when making investment decisions but the impact appears small. This suggests that assets exposed to climate change remain at risk of a sudden repricing. -
March 29, 2023
Lessons from our support of financial markets in tough times
Deputy Governor Toni Gravelle talks about how the Bank of Canada supported markets during the COVID-19 pandemic and what we might do differently in the future. He also discusses recent turmoil in the banking system in the United States and overseas.